Both Absa and the National Credit Regulator (NCR) refused this week to confirm the quantum of the fine that Absa will pay, the number of consumers impacted, or explain how consumers might benefit from a settlement reached between the bank and the regulator in a case against the bank for its lending practices in the so-called Satinsky vehicle-financing deals.
In July 2014, the Satinsky Group’s “Drive-a-new-car-for-R699-a-month” scheme imploded, leaving about 24 000 consumers in a precarious financial position. At the heart of the scheme was an advertising deal whereby consumers could earn a fee for using their cars as billboards for the scheme.
The fees generated from advertising the scheme effectively subsidised the vehicle instalment. But when the Satinsky Group’s holding company stopped paying the advertising rebate, consumers, mostly low-income earners, were unable to pay their instalments and fell into arrears.
At the time, it was alleged in numerous media reports that Satinsky’s sales staff, who acted as agents of the banks, had failed to conduct proper affordability assessments, or understated consumers’ living expenses, and that some consumers who were in arrears on their home loans or other credit agreements had been approved for credit. All of these misdemeanours constitute reckless lending, which is unlawful under the National Credit Act (NCA).
The settlement between the NCR and Absa is shrouded in secrecy in spite of the fact that it was made public by the Minister of Trade and Industry, Rob Davies, late last month.
Davies provided written responses to questions put to him by the Democratic Alliance (DA) in the process of Parliamentary questions and answers, all of which are on the public record.
The questions were submitted by Simon Lapping, a councillor for the DA in Ekurhuleni, and a crusader for consumers caught in the Satinsky scheme.
A case between the regulator and Absa concerning Satinsky customers was to be heard by the National Consumer Tribunal (NCT) in late November. Lapping asked what remedial action was decided and how it would benefit consumers affected by the case. He also asked whether a fine, settlement and/or criminal charges would be pursued against any person found guilty in the case.
In response, Davies said the matter was settled between the parties on the basis that Absa pay an administrative fine of R10 million, and that consumers would benefit as follows.
In terms of the settlement, Absa is to:
• Write off the cost of credit on credit agreements;
• Restructure repayments for consumers who are in arrears;
• Rescind any civil court judgments against consumers at its own cost; and
• Instruct the credit bureaus to remove adverse listings from the credit records of consumers.
In terms of the NCA, the “cost of credit” is the total amount owing – the principal debt, plus all charges. However, it would appear from Davies’s answers that the cost of credit here refers to interest only, or interest and all or some fees levied by the bank, such as the initiation fee and monthly administration fees, and default charges. If it meant the total amount owing, was to be written off, there would be no repayment to “restructure”.
The minister’s response also states that “Absa is required to submit to the NCR an audit report confirming compliance with the terms of the agreement and once the report is submitted, the NCR will inform the affected consumers.”
This seems to suggest that if you’re an affected Absa customer, you will be informed by the NCR only once Absa has complied with the terms of the settlement.
Personal Finance asked Absa this week to confirm that it had agreed to a R10-million fine and to explain precisely how customers with Satinsky loans are impacted.
This was Absa’s response: “Absa can confirm that the bank has co-operated with the NCR in its investigation into credit granted by Absa to clients in the Satinsky dealership. We can confirm Absa has agreed a mutually acceptable resolution of the matter with the NCR – and can confirm that the proceedings have been concluded by agreement to remediate specific customers. Absa is legally bound to abide by confidentiality, as stipulated in the accommodation reached with the NCR and is thus not in a position to comment on the particulars of the accommodation. We wish to acknowledge the role of the regulator to protect consumers against reckless lending practices. Absa reiterates that it is committed to acting in the right way and treating our customers fairly.”
In response to questions from Personal Finance, Nthupang Magolego, a senior legal adviser at the NCR, said “we have no further comment to add to the minister’s response already in your possession”.
The NCR did not respond to requests for its papers.
Personal Finance asked the NCT for a copy of the NCR’s settlement. But, Professor Bonke Dumisa, the acting executive chairperson of the NCT, said the settlement had not been lodged with the tribunal.
'PALTRY' FINE WON'T DETER REPEAT OF ALLEGED BAD LENDING PRACTICES, SAYS CONSUMER ADVOCATE
Simon Lapping, who has tirelessly lobbied the National Credit Regulator (NCR) to investigate the Satinsky scheme and to provide redress to consumers who were granted credit recklessly, was scathing of the “paltry settlement” reached between Absa credit and the regulator.
A R10-million fine will hardly be felt by a lender the size of Absa, Lapping says, and it therefore won’t deter the kind of bad lending practices alleged by consumers in this case.
Lapping says the NCR’s case against Absa stems from about 1 000 complaints lodged with the regulator by Satinsky buyers.
“In response, the regulator asked Absa for a random sample of 200 credit agreements [from the 6 500 credit agreements the bank has with Satinsky customers]. Upon investigation, the regulator found 70-odd to be dubious, and my understanding is that the relief in this settlement extends to these consumers only – which is grossly unfair.”
Lapping plans to lodge a complaint against the regulator with the Public Protector.
He says his complaint, which will be co-signed by Democratic Alliance Member of Parliament Michael Waters, will be for the failure of the regulator to conduct a thorough investigation in this case and for agreeing to a settlement that does not provide adequate redress to consumers.
Stephen Logan, the founder of Fair Credit, says this is history repeating itself: “It’s African Bank all over again: another case of the regulator taking a small sample [of credit agreements] and giving partial relief to a limited number of consumers.” A full audit of all credit agreements is required, he says.
The regulator has yet to bring cases against Nedbank’s Motor Vehicle Finance (MFC) and Standard Bank. MFC financed about 14 000 Satinsky deals, and reportedly has an exposure of R1.6 billion, while Standard Bank financed 3 600 Satinsky deals, giving it an exposure of R468 million.
If you are a Satinsky buyer and you believe you are a victim of reckless lending, all is not lost if you aren’t among the lucky few to benefit from the Absa/NCR settlement.
Logan says the fine provides a good basis for customers to stop paying their instalments. “The easiest route to redress under the National Credit Act is non-payment. Because when they don’t pay, the creditor takes you to court, and the court is obliged to determine if there was reckless lending, which must be raised as a defence by the consumer,” Logan says.
He cautioned, however, that consumers who go this route should be aware that if they lose in court they would have to pay the credit provider’s legal costs.
The regulator has also lodged a case against Satinsky 128 trading as Just Group Africa. Nthupang Magolego, a senior legal advisor at the NCR, told Personal Finance this week that the matter is pending at the National Consumer Tribunal (NCT). “We are waiting for a hearing date from the NCT,” Magolego said.